Does Blockchain Adoption Related to Cryptocurrency Returns

Abstract

This study investigates the connection between the creation of smart contracts in the Ethereum Virtual Machine and the returns of Ethereum and Bitcoin. The analysis reveals that while there is no connection between Bitcoin and smart contracts created on the Ethereum platform, a significant connection exists for Ethereum. Blockchain technology, which underpins cryptocurrencies, has garnered significant attention for its potential applications beyond financial transactions, including supply chain management, healthcare, and digital identity verification. We argue that blockchain adoption would increase the application of blockchain in general. We use the growth of smart contracts as a proxy for blockchain adoption. The findings suggest that the volume growth of smart contracts is correlated with the return on Ethereum but not on Bitcoin. This research contributes to understanding blockchain technology's impact on cryptocurrency performance and offers insights for academics and practitioners interested in the evolving landscape of digital assets.